Speaker 1: Bloomberg Audio Studios, podcasts, radio News.
Speaker 2: We're going to stay with robin Hood because the company
Speaker 2: this week rolled out updates to was AI assistant and
Speaker 2: prediction market offerings. In fact, prediction markets are now Robinhood's
Speaker 2: fastest growing product line by revenue, with analyst at Citizens
Speaker 2: expecting fivefold growth by twenty thirty. So joining us live
Speaker 2: on the heels of that announcement is the CEO of
Speaker 2: robin Hood, Flat Teneve and my Bloomberg Crypto co host
Speaker 2: Tim Senwik joins us now as well. Loatt, It's great
Speaker 2: to speak with you, and I want to start with
Speaker 2: these sports wagering capabilities that you've added to your suite
Speaker 2: of offerings. Here these preset combination contracts for professional football
Speaker 2: games NFL games. It sounds like this is your version
Speaker 2: of parlays that are offered by traditional sportsbooks. So what
Speaker 2: is the difference between a combination trade and a parlay?
Speaker 3: Yeah, So, as you mentioned, this is part of our
Speaker 3: big unveil of prediction markets, which we've offered for a
Speaker 3: little bit over a year. But remember we started with
Speaker 3: just one prediction market on the platform, which was the
Speaker 3: presidential election in twenty twenty four and Since then, we've
Speaker 3: gone to over one thousand, five hundred contracts on the
Speaker 3: platform across pretty much every domain. We've got politics, we've
Speaker 3: got world affairs, economics, culture, and we recently added weather,
Speaker 3: and of course, as you mentioned, sports. So I think
Speaker 3: the major innovation here and why it's been so disruptive
Speaker 3: to the sports industry is you can take the general
Speaker 3: prediction markets infrastructure, which are markets that trade on regulated
Speaker 3: exchanges where buyers and sellers are matched, and apply them
Speaker 3: to pretty much everything. Now. Of course sports is an
Speaker 3: important subset of that because there's an existing large market there.
Speaker 3: But we see a world where we're actually the percentage
Speaker 3: of nonsports contracts grows much faster than sports, and I
Speaker 3: think several big industries are likely to be disrupted in
Speaker 3: the future, things like insurance. You can imagine with the
Speaker 3: weather contracts we have on a platform. People have already
Speaker 3: pointed out that, you know, trading and hedging with a
Speaker 3: insurance weather contract could be superior to buying traditional insurance
Speaker 3: through a broker. So as the market matures and you
Speaker 3: see increased in institutional participation, I think we could be
Speaker 3: at the very beginning of a prediction market supercycle. With
Speaker 3: growth in volumes and enlisted contracts accelerating from here.
Speaker 2: Well, we've had a few incidents now of alleged insider
Speaker 2: trading in prediction markets. Do you think insider trading poses
Speaker 2: a risk to fairness in prediction markets or could help
Speaker 2: ensure market accuracy by allowing those with privileged information to participate.
Speaker 3: Well, I'm not exactly sure which incident you're referring to.
Speaker 3: There was an incident in the sports betting space, which
Speaker 3: is entirely differently regulated, right, those are regulated on a
Speaker 3: state by state basis, and I think they're obviously working
Speaker 3: hard to address these issues. But what I tell you
Speaker 3: is financial markets have had the infrastructure in terms of
Speaker 3: surveillance and monitoring to deal with these types of concerns,
Speaker 3: and they've been dealing with it for decades. Because obviously,
Speaker 3: insider trading originated as a market integrity measure for the
Speaker 3: equities market. We want to make sure we have protections
Speaker 3: as an industry to make sure corporate insiders and other
Speaker 3: folks weren't using their privileged information about what a company
Speaker 3: was going to release to trade ahead of that disclosure
Speaker 3: being available publicly. So this has pretty much always been
Speaker 3: a financial markets thing, and so I think financial markets
Speaker 3: have the best tools to deal with it.
Speaker 1: Glad, I'm wondering about prediction markets, and specifically Robinhood and
Speaker 1: others too, if they offer enough protections to consumers against
Speaker 1: addictive betting, how do you solve for that? At Robinhood, I.
Speaker 3: Mean, I think our philosophy is, if you look at
Speaker 3: prediction markets, there's a tremendous amount of value in the
Speaker 3: diversity and variety of contracts and what we're actually seeing,
Speaker 3: similar to trading, a lot of people that actually have strategies,
Speaker 3: So it's not you know, it's not as much of
Speaker 3: like I'm buying a team because I'm a fan of it,
Speaker 3: But there's systematic trading and people are analyzing these things
Speaker 3: and they have strategies around it, and it goes beyond sports.
Speaker 3: You guys were mentioning the Warner Brothers merger situation. If
Speaker 3: you notice the question on everyone's mind is what's likely
Speaker 3: going to happen to Warner Brothers. Who's going to acquire
Speaker 3: the company? Is it going to be Netflix or Paramount,
Speaker 3: Skuidance or neither of the above. And right now, we
Speaker 3: look at the stock prices right and we try to
Speaker 3: reverse engineer. What's happening with the situation. Well, there's a
Speaker 3: prediction market that we illustrated on the platform, and you
Speaker 3: can see last night it was showing fifty five percent
Speaker 3: chance Paramount would actually be the ultimate acquier. This morning
Speaker 3: it went to seventy five percent. Netflix. So even in
Speaker 3: terms of what value they provide to the news, it
Speaker 3: can be incredibly powerful and more direct to zero in
Speaker 3: on the results of that specific outcome. And now I'm
Speaker 3: not saying everyone should be trading prediction markets any derivatives market.
Speaker 3: I think people have to make sure it's right for them.
Speaker 3: But I think they're resonating quite strongly with our active traders,
Speaker 3: and also I think they're a great way for other
Speaker 3: folks who may be interested in trading to learn about
Speaker 3: the new asset class.
Speaker 1: It's an incredibly competitive space, flat, I don't need to
Speaker 1: tell you that, and you have companies and people being
Speaker 1: minted billionaires as a result of the competitive space. Right now,
Speaker 1: I'm wondering about the dynamics and how you view the
Speaker 1: competitive dynamics and whether you have an edge after acquiring
Speaker 1: ledger X. Talk about that a little bit.
Speaker 3: Yeah, I mean, right now we're the largest broker in
Speaker 3: the space, and actually the brokerage landscape is not very competitive.
Speaker 3: I mean, we're pretty much the only game in town
Speaker 3: in terms of the exchanges offering prediction market services. I
Speaker 3: think there's a big argument to be made for this
Speaker 3: to be an increasingly institutional business over time. In the
Speaker 3: same way that crypto markets started off being exclusively retail
Speaker 3: and have sort of like built up institutional adoption over time,
Speaker 3: I think you can make a perhaps even stronger argument
Speaker 3: that the same is going to happen with prediction market
Speaker 3: event contracts. If you just look at the trillions that
Speaker 3: are being used are being deployed into interst rate futures
Speaker 3: and swaps to hedge interest rate risk by institutions, prediction
Speaker 3: markets offer a way more direct mechanism for actually hedging
Speaker 3: that risk. So our acquisition, our partnership with SIG to
Speaker 3: acquire ledger x, I think is a way for us
Speaker 3: to tap into what we believe will be a growing
Speaker 3: institutional market for this asset class. And if you couple
Speaker 3: that with our broad retail reach, I think that positions
Speaker 3: well to continue growing with the space, if not faster
Speaker 3: than the aggregate growth in the sector.
Speaker 1: What's the effect that that acquisition has on. Let's say
Speaker 1: call Schaef for example, that is a partner of yours
Speaker 1: right now, but also a competitor.
Speaker 2: Yeah.
Speaker 3: I mean the more prediction market exchanges join the market,
Speaker 3: the more price competition there is, right, and we see
Speaker 3: a world where it's increasingly multipolar. I think there's going
Speaker 3: to be multiple dozens prediction market exchanges, and I think
Speaker 3: that will lead to a great outcome for ultimately the
Speaker 3: traders in the space, because the more exchanges there are,
Speaker 3: the more we put pressure on the transaction fees and
Speaker 3: get them to be close to rock bottom. And what
Speaker 3: happens is more liquidity comes into the space, more institutional interest,
Speaker 3: and prices go down. And as with any ass at,
Speaker 3: you know, crypto equities options Robin who is just focusing
Speaker 3: on providing the best execution for customers. So we connect
Speaker 3: to a wide variety of exchanges and market centers to
Speaker 3: facilitate that.
Speaker 2: A lot for a lot of people, it's not clear
Speaker 2: what the difference is between prediction markets and outright gambling.
Speaker 2: Are you concerned about potential hit to volumes if you're
Speaker 2: forced to exit certain states over conflicts with gambling regulators.
Speaker 3: Yeah, I think a lot of times this discussion of
Speaker 3: you know, is it trading or gambling gets into sort
Speaker 3: of a debate on the meetings of words. But one
Speaker 3: clear benefit of prediction markets is that these contracts are
Speaker 3: traded on regulated exchanges where buyers and sellers meet together.
Speaker 3: And essentially this has a lot of downstream effects, right.
Speaker 3: One of them is you get a wide variety of
Speaker 3: contracts being offered. You know, we've gone from one to
Speaker 3: thousands in the past year. You could see a world
Speaker 3: where it gets to tens of thousands and hundreds of thousands,
Speaker 3: and pretty much any event could be priced in real
Speaker 3: time and tradeable. The second is because these happen on
Speaker 3: an exchange where buyers and sellers meet, our incentives aren't
Speaker 3: to trade against our customers, and that's how a lot
Speaker 3: of these you know, state regulated operators run. Their business
Speaker 3: model is not to exchange orders. It's actually to trade
Speaker 3: against the customer, which basically you know, and they kind
Speaker 3: of jiu jitsu around this when when they get asked,
Speaker 3: but there they make money when their customers lose. Our benefit.
Speaker 3: Our incentive as a business is to bring on customers
Speaker 3: and have those customers account balances grow steadily and monotonically
Speaker 3: over time. So I think we're actually incentive to grow
Speaker 3: with our customers, and that leads us to offering a
Speaker 3: wide variety of products for them to invest and trade in,
Speaker 3: not just prediction markets, which are enticing to bring new
Speaker 3: people in, but also things like Robinhood strategies, retirement, the
Speaker 3: Cortex AI tools that are continuing to proliferate throughout the platform.
Speaker 2: Yeah.
Speaker 3: So our vision is, really, can we build a financial
Speaker 3: super app where all of your financial needs are met
Speaker 3: in one place and all of your all of your
Speaker 3: finances are managed to the best of our ability at Robinhood.
Speaker 2: Well, speaking of all financial needs, there's a lot of
Speaker 2: chatter on Trump accounts for kids, where the government seeds
Speaker 2: investment accounts with one thousand dollars for children as part
Speaker 2: of the One Big, Beautiful Bill. Are you still positioning
Speaker 2: yourself for consideration? Have you heard who else might be
Speaker 2: in the running?
Speaker 3: Yeah? Well, I've spoken to the President and obviously the
Speaker 3: government about this personally, and basically, while we can't give
Speaker 3: you the details of what we're involved in or what
Speaker 3: we're talking about, I think this is incredibly important. I
Speaker 3: think we have a huge risk in this country of
Speaker 3: people not believing in the free markets and in the
Speaker 3: financial system because they don't have skin in the game.
Speaker 3: I think it's especially a problem now when we're in
Speaker 3: this massive wave of AI driven disruption. So you know,
Speaker 3: you're seeing AI products being adopted at an accelerating rate,
Speaker 3: but at the same time AI being generally unpopular because
Speaker 3: people are pretty pretty worried about what impact it's going
Speaker 3: to have on them and their jobs. And I think
Speaker 3: the best way to actually counteract this is from an
Speaker 3: early age, give people a stake in what's being built
Speaker 3: in the great industries of this country. So I think
Speaker 3: it's a great initiative, and we've assured them that we're
Speaker 3: standing ready to help in the maximum way possible.
Speaker 1: To Scarlett's point, Ray Dalio's going to donate to Trump
Speaker 1: accounts and Connecticut Blackrock is going to match Trump account
Speaker 1: contributions for employees. A lot of companies are wondering if
Speaker 1: their companies are going to do it, any plans to
Speaker 1: do that for Robinhood employees.
Speaker 3: I think we're thinking of a lot of things, and
Speaker 3: what I'm mostly interested in is, you know, obviously not
Speaker 3: to downplay Robinhood has thousands of employees, but I think
Speaker 3: our value is we serve tens of millions of customers
Speaker 3: in the US and we've got you know, over a
Speaker 3: third of a trillion in assets on the platform, So
Speaker 3: we're sort of like thinking bigger, like how can we
Speaker 3: help every single company and every single individual in this
Speaker 3: country plug into the system. Of course we're interested in
Speaker 3: thinking for our employees, but the impact of that is
Speaker 3: like relatively low when it comes to the whole country,
Speaker 3: and we're really thinking about how can we help the
Speaker 3: whole country and this program be as successful as possible.
Speaker 1: Heyfa, before we let you go, I want to talk
Speaker 1: a little more about the core tech AI offering and
Speaker 1: what you're trying to build in this financial super app
Speaker 1: at Robinhood. If you think about this from the perspective
Speaker 1: of and you made clear you don't want this to
Speaker 1: be an advisor by any means, but you want people
Speaker 1: to be able to ask questions to the app about
Speaker 1: different stocks or help find stocks. How is it powered, Like,
Speaker 1: what is the AI that powers core techs AI, how
Speaker 1: is it trained? And what's the underlying model that you're using.
Speaker 3: Yeah, so it's an agentic system, which maybe you guys
Speaker 3: have heard this buzzword before, but it's not actually just
Speaker 3: purely the underlying models. We use a variety of models
Speaker 3: under the hood to power different You can think of
Speaker 3: them as experts on our platform. And I think the
Speaker 3: big advantage that we have when you compare it you say, Chat,
Speaker 3: GPT or other lms or agents, is we have not
Speaker 3: just the personal information about customers and their accounts and
Speaker 3: their activity with us, but we also have real time
Speaker 3: market data across multiple assets streaming into the system, and
Speaker 3: that allows us to actually ground the information we provide
Speaker 3: with a high degree of accuracy. So now we can
Speaker 3: tell you not just the real time prices for stocks,
Speaker 3: but also real time predictions and what's likely to happen
Speaker 3: around thousands of real world events. So you can imagine
Speaker 3: all of this is culminating into if you're a customer
Speaker 3: of Robinhood, you no longer have to rely on external
Speaker 3: sources for the inspiration and the idea behind a trade.
Speaker 3: It used to be that Robinhood is pretty much just
Speaker 3: a tool to execute the trade, but now the goal
Speaker 3: is to actually help you with the research, the idea,
Speaker 3: generate the inspiration behind the trade and prediction markets Cortex
Speaker 3: and Robinhood's social which is a new social network we
Speaker 3: unveiled at Hoods Summit a couple of weeks ago. Are
Speaker 3: all converging to drive this evolution and what Robinhood is becoming.
Speaker 2: So Cortex is going to be available to your Gold subscriber,
Speaker 2: so it sounds like it's a premium service. They'll be
Speaker 2: paying an additional fee to get these tools. Do you
Speaker 2: plan to launch any kind of basic version.
Speaker 3: Of this, you know, we're thinking about that. Like Cortex
Speaker 3: and Robinhood Gold in general, it is a subscription service,
Speaker 3: but it's very accessible. So it starts at five dollars
Speaker 3: a month, fifty dollars for the year, and we've seen
Speaker 3: that over a third of customers that sign up to
Speaker 3: Robinhood on a quarterly basis actually adopt the Gold subscription
Speaker 3: relatively quickly. So we see a world where the attachmate
Speaker 3: of our Gold subscription offering goes up even more and
Speaker 3: it really rivals the attachmates of the leading subscription offerings
Speaker 3: industry wide, not just financial services, but also you look
Speaker 3: at music streaming video and I think we can be
Speaker 3: best in class there. So of course, nothing said in stone.
Speaker 3: We're going to continue to iterate. We might end up
Speaker 3: with as you suggest, a basic version, but right now
Speaker 3: we're not seeing any bottlenecks to adoption of Cortex from
Speaker 3: the Gold subscription.
Speaker 2: All right, good stuff, Vlad. Really appreciate your joining us today.
Speaker 2: Lad ten Of is Robin Hood CEO, and I also
Speaker 2: want to thank my co host. I'm Bloomber Crypto Tim Stenovik.